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SINA Corp (NASDAQ:SINA), a major Chinese portal site and creator of Weibo (“China’s Twitter”), recently rallied after the company announced that Internet giant Alibaba had purchased an 18% stake in Weibo.

In addition to the initial investment, SINA Corp (NASDAQ:SINA) is giving Alibaba the option to increase its stake in Weibo to 30% within a limited time on a mutually agreed valuation. Sina is also expanding its e-commerce partnership with Alibaba by finding ways to merge SINA Corp (NASDAQ:SINA)’s social networking capabilities with Alibaba’s e-commerce platforms.

How will this new partnership between the two giants of Chinese cyberspace influence other major players, such as Baidu.com, Inc. (ADR) (NASDAQ:BIDU), Tencent Holdings andYahoo! Inc. (NASDAQ:YHOO)?

Targeting Tencent

Alibaba’s $586 million investment in Weibo values the social networking site at $3.26 billion, far more than the $600 million to $2.5 billion that analysts had previously estimated. Weibo currently has an active user base of 500 million, which has grown rapidly since its inception in 2009, and benefited greatly from the lack of competition from Twitter orFacebook Inc (NASDAQ:FB), which are both banned in China.

Despite Weibo’s success, it has been overshadowed by rival Tencent Holdings, which has dominated the mobile and desktop messaging markets with two apps – WeChat and Tencent QQ. WeChat, which has an active user base of 200 million, is a text and voice messaging application for smartphones. Tencent QQ is the country’s most popular instant messaging application on desktop platforms, with more than 670 million users.

30% of Weibo’s total fourth quarter revenue was generated by smartphone advertisements, which was boosted by an 82% year-on-year increase in daily active users. 75% of the site’s users were accessing the site from a mobile device. However, SINA Corp (NASDAQ:SINA) CEO Charles Chao acknowledged that mobile users were spending more time on WeChat and Tencent QQ, which could throttle its ability to monetize its explosive mobile growth.

Therefore, a partnership with Alibaba’s Taobao (“China’s eBay”), which controls 90% of China’s consumer-to-consumer e-commerce market, could increase shopper dependence on Weibo’s messaging and social networking features, taking a bite out of Tencent’s market share.

Alibaba and Weibo intend to connect their accounts, exchange data and offer shared online payment systems, creating a seamless integration between the two sites. Taobao and Weibo already have an estimated shared user base of 40%, which will make the transition fairly easy. Alibaba will also advertise more heavily on Weibo to capitalize on its booming social network. The alliance is expected to generate $380 million in advertising and social e-commerce revenues for Weibo over the next three years.Bye bye, Baidu

SINA Corp (NASDAQ:SINA)’s partnership with Alibaba isn’t its first major partnership with a big industry peer. Last year, Sina allied with search giant Baidu to integrate the latter’s search capabilities into its mobile website. In exchange, Baidu added Weibo to its cloud-based initiative.

Baidu.com, Inc. (ADR) (NASDAQ:BIDU) has been struggling to transfer its dominance on desktop platforms, where it enjoys a 79% market share, to mobile platforms. China’s mobile market is a rapidly growing one, rising from 700,000 users in 2008 to 400 million at the end of 2012. In mobile advertising, Baidu only controls a third of the market, while Tencent and Easou have been catching up quickly, with respective market shares of 23% and 22%. Less than 10% of Baidu’s total revenue came from mobile ads in 2012. During the first quarter, Baidu was able to grow its mobile users 25% sequentially to 100 million, but its footprint is still tiny compared to the user numbers from Sina and Tencent.

Shares of Baidu.com, Inc. (ADR) (NASDAQ:BIDU) were recently crushed after the company reported yet another quarterof slowing top and bottom-line growth, exacerbated by contracting margins. Intensifying competition fromQihoo 360, which now has a rapidly growing market share of 12.5%, is squeezing its desktop growth, while Sina, Tencent and Alibaba are affecting its ability to properly monetize the mobile market.